The Micro Finance Industry Network India’s first RBI-recognised Self-Regulatory Organisation (SRO) for the microfinance sector, has released the 57th edition of Micrometer for Q4 FY25-26, based on industry data as of March 31, 2026.
The latest report highlights early signs of recovery in India’s microfinance sector, with the industry witnessing a quarter-on-quarter portfolio growth of over 3% after seven consecutive quarters of contraction. As of March 31, 2026, the industry’s total microfinance portfolio stood at ₹3,25,174 crore, supported by quarterly disbursements of ₹77,524 crore — the highest in the last seven quarters.
The report indicates that while the sector experienced a prolonged period of consolidation, credit quality has gradually improved and returned to pre-March 2024 levels. Portfolio at Risk (PAR) for 31–90 days stood at 0.8%, while PAR for 91–180 days stood at 1.2% as of March 31, 2026, reflecting continued improvement over the past eight quarters.
Commenting on the report findings, Dr. Alok Misra, CEO & Director, MFIN, said:
“Despite the challenges faced over the last two years, the industry is turning the corner, as reflected by the uptick in portfolio and continued improvement in Portfolio at Risk. PAR 31–180 days has declined to 2.0% as of March 2026 from 6.3% a year ago. The extension of the CGSMFI 2.0 scheme by the Government of India till August 2026 will provide further support to the sector’s recovery.”
“The sector has strengthened its own performance through improved practices and MFIN Guardrails. It is now important for banks to actively come forward and support the cause of financial inclusion,” he added.
Portfolio Diversification and Changing Industry Landscape
The 57th edition of Micrometer introduces dedicated analysis on portfolio diversification, tracking the composition and performance of microfinance and non-microfinance portfolios, along with on-balance sheet and off-balance sheet exposures across NBFC-MFI size categories.
The analysis reflects the evolving business models of MFIs following regulatory flexibility around qualifying asset norms.
The Other Regulated Entities section, introduced in the previous edition, continues to provide comprehensive insights into microfinance activities undertaken by banks, Small Finance Banks (SFBs), and NBFCs that are MFIN members.
NBFC-MFIs Continue to Lead Microcredit Market
As of March 31, 2026, microfinance operations were spread across 36 States and Union Territories and 721 districts.
NBFC-MFIs continued to remain the largest providers of microcredit, accounting for 44.2% of the total industry portfolio, followed by banks at 32.7%. SFBs and NBFCs contributed the remaining share.
On a year-on-year basis, while all entity categories witnessed a decline in outstanding portfolios, NBFC-MFIs recorded the lowest decline at 2.7%, while banks saw a decline of 30%.
The report also highlighted funding challenges faced by smaller MFIs during the year. With All India Financial Institutions maintaining a cautious approach towards smaller players, banks, NBFCs and External Commercial Borrowings (ECBs) emerged as the key funding sources, though at lower levels compared to previous years.
Eastern Region Continues to Drive Growth
The Eastern region remained the largest contributor to the microfinance portfolio, accounting for 36.6% of the industry share, underlining the sector’s continued focus on underserved communities.
At the state level, Bihar, Uttar Pradesh and Tamil Nadu emerged as the top three states in terms of portfolio share, with the top ten states collectively accounting for nearly 80% of the industry portfolio.
Outlook for FY27
MFIN noted that improving portfolio performance, rising disbursements and supportive policy measures provide positive momentum for FY26-27. However, the sector remains mindful of external factors, including the impact of a below-average monsoon forecast and geopolitical developments such as the West Asia conflict, which may influence rural livelihoods.
MFIN reiterated that sustained collaboration between financial institutions, policymakers and industry stakeholders will be essential to strengthen financial inclusion and support responsible growth.